Shandong department regulations stipulate that the realization of virtual currency disposal should not be less than 80% in principle?

Author: Lawyer Liu Yang

On August 25, 2023, the Shandong Provincial Department of Finance and other 17 departments issued a notice on the issuance of the "Work Process for the Disposal of Confiscated Items in Shandong Province (Trial)" (hereinafter referred to as the "Notice"). The "Notice" came from the legal level It is said that it belongs to local government regulations. Local government regulations refer to the people's governments of provinces, autonomous regions, municipalities directly under the Central Government, districted cities, and autonomous prefectures. They may formulate regulations in accordance with laws, administrative regulations, and local regulations of the province, autonomous region, or municipality directly under the Central Government.

Lawyer Liu Yang separately listed the parts involving virtual currency and analyzed them one by one.

Article 36 of the "Notice" clearly states: "Prepaid cards and virtual currencies confiscated by law enforcement agencies in accordance with the law can be negotiated with the merchants that issued the prepaid cards and virtual currencies, and ** the merchants can bid to recover them, ** The recycling price shall be agreed upon by both parties, and shall in principle not be less than 80% of the face value or balance of the virtual currency, prepaid card, and both parties shall sign a recycling agreement.”

The lawyer believes that the "Notice" does not clarify whether "virtual currency" includes virtual digital currencies mainly represented by Bitcoin, Ethereum, and Tether. If the above-mentioned virtual digital currencies are included, the clause has the following regulatory significance: ** First, ** can only negotiate with the issuer of virtual digital currencies. For Bitcoin and Ethereum, you can find the corresponding foundation, and for Tether, you can find TEDA Company. The "Notice" does not allow sales to third-party companies. Second, it must be recycled by the issuer, and no less than 80% of the actual value. The lawyer believes that if virtual digital currency is included, this clause will be difficult to operate in actual disposal. First, does the issuer have the intention to recycle? If the issuer is unwilling to recycle it, how should it be disposed of? Even if the issuer is willing to recycle, is it feasible for the judicial authorities to directly sign a contract with the overseas entity? How to deal with legal disputes related to recycling agreements?

Lawyers are more willing to believe that the virtual currencies mentioned in the "Notice" are still highly centralized virtual currencies with domestic issuers, represented by Q Coin and Doubi.

What should we do if the virtual currency mentioned in the "Notice" does not include the virtual digital currency we often refer to? Article 40 of the "Notice" stipulates "If the above disposal methods are not applicable to the confiscated items, the law enforcement agencies should make disposal suggestions based on the nature and classification of the confiscated items, consult with the finance and other departments at the same level, and propose a disposal plan, Report to the higher-level financial department for filing." The disposal of virtual digital currencies has returned to the embarrassing situation of having no legal basis.

Under what circumstances can an item be disposed of before it is determined to be confiscated? Article 45 of the "Notice" clearly states "...(3) Financial assets such as bonds, stocks, and fund shares with large market price fluctuations..." Do virtual digital currencies such as Bitcoin fall into this category? The lawyer believes that according to my country's existing legal provisions, virtual digital currencies such as Bitcoin do not fall into the category of financial property, so they do not meet the conditions for advance disposal.

However, in practice, it is not uncommon for judicial organs to dispose of virtual digital currencies before taking effect. The legal basis and reason are mainly "the voluntariness of the suspect (defendant, party)". Article 46 of the "Notice" clearly states that " Prior disposal of items must be subject to the consent of the right holder or a written application submitted by the right holder, and approval by the person in charge of the law enforcement agency before they can be disposed of in accordance with the law." That is, if the right holder does not agree to the first disposal of virtual digital currency, the judicial authority There is no right to dispose first without an effective judgment, and the price of virtual digital currency fluctuates greatly, and it is difficult to restore it to its original state once disposed of. Therefore, lawyers suggest that rights holders should fully consider the relevant legal risks when agreeing to dispose of virtual digital currency first.